Glitch in Lottery Contract Bill Puts Governor in Bind

Nearly two weeks ago, as the Legislature prepared to adjourn for the year, weary lawmakers, hoping to open California’s multimillion dollar lottery to more competition, agreed to loosen rules that require bidders to disclose reams of detailed financial information.

But in what became an embarrassing disclosure in itself, it was discovered Thursday that a drafting error in the hastily drawn measure could mean that bidders would not have to provide financial or background information at all.

The bureaucratic snafu sent legal experts at the Lottery Commission and the governor’s office scurrying to find a way out before midnight Tuesday, the deadline for Gov. George Deukmejian to act on the bill.

“The biggest contracts of all would have the smallest amount of scrutiny if the bill does what it appears to on its face,” lamented Deputy Atty. Gen. Allen Sumner, one of several lawyers who caught the mistake. “It’s the classic example of what happens when you try to do something as complex as this at 1 a.m. on the last day of the session.”

‘Mocked-Up’ Version

The glitch occurred as the lawmakers voted not on the actual printed bill, but on a “mocked-up” version that is literally pasted together without the usual careful review by the Legislature’s attorneys.

Last-minute attempts to retool the lottery bill were supported by the attorney general’s office because of fear that only one firm--Scientific Games Inc., which bankrolled much of the campaign that resulted in voter approval of the lottery initiative--would be able to comply with the extensive disclosure requirements called for in the measure. Scientific Games was the only qualified bidder for the initial “scratch-off” lottery games that are scheduled to begin next week.

Only one other firm has announced an interest in bidding to run the more sophisticated computerized lottery games due to start next year. That contract, which could be worth as much as $200 million over the next four years, is scheduled to be awarded in December, a month before the Legislature reconvenes.

Lottery officials and some state lawmakers have been insistent about the need for some sort of disclosure to make sure that the California Lottery is not tainted by charges of organized-crime connections or is not harmed by bidders who do not have the financial backing to successfully operate the games.

Difficult Position

As a result, the drafting error leaves Deukmejian in a difficult position. If he signs the bill, there may be no disclosures. If he vetoes it, the stricter disclosure rules will remain in effect, thereby discouraging competition.

“That’s the essence of the dilemma,” Sumner said. He added, however, that lawyers are carefully studying the language of the bill to see whether the measure still can be interpreted as calling for some kind of disclosure.

Bob Taylor, Deukmejian’s deputy press secretary, said officials in the governor’s office also are trying to assess the situation. “As soon as we figure it out we’ll tell you,” Taylor said.

Lottery officials were restrained about the problem, refusing comment other than to say that there may be other firms willing to bid even if the bill is vetoed and the stricter disclosure requirements remain in force. “We can operate under the way it is right now,” the spokesman said.